Capital Markets and Blockchain: Enabling Benefits, Overcoming...

Capital Markets and Blockchain: Enabling Benefits, Overcoming Challenges

Capital Markets CIO Outlook | Friday, August 16, 2019

Secure, fast, and efficient, blockchain strategies can empower capital markets with highly relevant solutions.

FREMONT, CA: The potential applications of blockchain in capital markets have generated a lot of interest lately. The primary characteristics of blockchain with decentralized, secure, and immutable organizing and transfer of data, make it particularly sophisticated and valuable. Blockchain's applications range across many industries and processes. The firms in capital markets can find many benefits by adopting and developing blockchain-based solutions.

The technology of blockchain involves digital ledgers or block, which are connected to form a chain. These blocks store information that stakeholders can access. In the context of capital markets which has a complex way of functioning and involves multiple parties like buyers, sellers, broker, and regulators, a blockchain can be a major advantage as it lends secure coordination.

Many firms from the financial sector have already carried out pilot projects to determine the applicability of blockchain technology and have got excellent outcomes. Although the capital markets are some distance away from a comprehensive shift to the blockchain, the number of integrations will keep increasing gradually. Quick transaction facility is a very desirable attribute in the digital era. But even today, transactions take a while to be settled. Deploying a cryptocurrency token for a transaction is an effective solution as it is transferred almost immediately to beneficiaries, thereby confirming the settlement of dues.

Transfer of critical and private data between stakeholders requires security infrastructure. Firms can utilize the secure nature of blockchain technology to deliver data between separate databases or stakeholders without fear of risks. Blockchain prevents manipulation of data and thus, is also a stepping stone to regulatory compliance. Regulatory authorities can also gain access to the blockchain, making audits and evaluations smoother and convenient.

The capability to carry out immediate transactions makes sure there are no scopes for delays or frauds. Risk is eliminated in operations that require pre-funding or credit. Smart contracts are a very efficient way of incorporating automated payment processing wherein parties involved can benefit from secure controls. The technology can significantly impact back-office processes by standardizing instruments and data formats. When there are so many benefits to realize, it is apparent that the sector will look forward to quick development and implementation of blockchain solutions.

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